Trump Overhauls Student Loan System — Major Changes Hit July 1
- 3 days ago
- 1 min read
Starting July 1, 2026, millions of student loan borrowers will face a fundamentally different federal lending landscape after the Trump administration's sweeping overhaul of the student financial aid system takes effect. The changes — part of the broader Working Families Tax Cuts Act — represent the most significant restructuring of federal student lending in a generation.
At the heart of the overhaul is the elimination of multiple income-contingent repayment plans, which are being replaced with two new options: the Repayment Assistance Plan (RAP) and a new Tiered Standard repayment plan. Both plans will be available starting July 1, and borrowers will need to evaluate which option best fits their financial situation going forward.
The administration is also eliminating the Grad PLUS loan program, which has allowed graduate and professional students to borrow up to the full cost of attendance with no cap. In its place, new annual and aggregate borrowing limits will apply to graduate programs starting July 1 — a move aimed at reducing the overall volume of federal student debt being issued.
One area of immediate relief: the Trump administration announced that borrowers who enroll in autopay will receive a temporary 1-percentage-point reduction in their interest rate, effective July 1, 2026, through June 30, 2028. Additionally, the entire $1.7 trillion federal student loan portfolio is being transferred from the Department of Education to the Treasury Department as part of a broader government restructuring effort.
Watch President Trump's June 17 press conference above where he discussed education reform and his administration's broader economic agenda.
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